results review 1qfy19 12 aug 2018 dlf · remain positive on dlf on account of deleveraging....

12
RESULTS REVIEW 1QFY19 12 AUG 2018 DLF BUY HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters On track DLF’s prior period figures are not comparable on account of DLF moving from Percentage Completion to Project Completion method of accounting under IND AS 115 from 1QFY19. This led to reversals of Rs 53.8bn from retained earnings (Revenue reversal of ~Rs 140bn, last 5yrs cumulative sales) for its uncompleted projects majorly in DLF 5 (as hand over/ possession letters were delayed even in some completed projects). NCR market has shown signs of demand recovery starting over the past couple of quarters. DLF recorded Rs 6bn of net pre-sales of which Rs 4.5bn is in DLF Phase V. This is encouraging as form almost 60% of inventory. We are little surprised with quantum of IND AS-115 sales reversals on projects which are in last stages of completions, DLF attributes it to conservative accounting. Adjusted for land payment of Rs 7.5bn, DLF achieved 1QFY19 cash flow break even. We remain positive on DLF on account of deleveraging. Maintain BUY with NAV of Rs 279/sh. Highlights of the quarter Pre-sales recovering: DLF achieved Rs 6bn of pre- sales on Rs 135bn of inventory and maintained Rs 20- 22.5bn annual pre-sales. The ready inventory shall get monetized over 5-6yrs. New land capex will be strategic viz. HSIIDC land which has a development potential of 2.5mn sqft (commercial) and DLF is searching for PE partner to take up 50% stake. Standalone debt to reduce: DLF’s net debt (ex. DCCDL) is Rs 71.2bn (increase by Rs 7.5bn – , HSIIDC & MRC acquisition) which will further decrease post the expected QIP (timeline not yet clear) of ~173mn shares and residual promoter inflow of ~Rs 23bn. Existing inventory is majorly completed and DLF expects positive FCF generation from 2HFY19E. Rental portfolio to exhibit strong growth: DCCDL will continue to add > Rs 10bn to the bottom line annually. Rent revisions, new additions (eg. Cyber Park), fresh developments will drive rental yields for DLF. Financial Summary* Year Ending March (Rs mn) 1QFY19 1QFY18 YoY (%) 4QFY18 QoQ (%) FY17 FY18 FY19E FY20E Net Sales 15,074 82,212 (81.7) 13,777 9.4 82,212 67,068 80,136 84,657 EBITDA 3,086 34,333 (91.0) (138) (2,329.7) 34,333 23,774 38,113 40,429 APAT 1,728 7,148 (75.8) 517 234.0 5,028 (2,415) 4,081 6,500 Diluted EPS (Rs) 1.0 4.0 (75.8) 0.3 234.0 2.8 (1.4) 2.3 3.7 P/E (x) 69.7 - 86.3 54.2 EV / EBITDA (x) 17.5 26.1 16.6 15.7 RoE (%) 3.0 (1.0) 1.6 2.6 Source : Company, HDFC sec Inst Research, * Consolidated INDUSTRY REAL ESTATE CMP (as on 10 Aug 2018) Rs 197 Target Price Rs 279 Nifty 11,430 Sensex 37,869 KEY STOCK DATA Bloomberg DLFU IN No. of Shares (mn) 1,784 MCap (Rs bn) / ($ mn) 351/5,092 6m avg traded value (Rs mn) 1,279 STOCK PERFORMANCE (%) 52 Week high / low Rs 274/153 3M 6M 12M Absolute (%) (8.0) (14.2) 19.4 Relative (%) (15.4) (25.6) (0.7) SHAREHOLDING PATTERN (%) Promoters 74.95 DIIs & Local MFs 1.63 FPIs 16.69 Public & Others 6.73 Source : BSE Parikshit D Kandpal [email protected] +91-22-6171-7317 Kunal Bhandari [email protected] +91-22-6639-3035

Upload: others

Post on 23-Mar-2020

4 views

Category:

Documents


0 download

TRANSCRIPT

Page 1: RESULTS REVIEW 1QFY19 12 AUG 2018 DLF · remain positive on DLF on account of deleveraging. Maintain BUY with NAV DLF.of Rs 279/sh. Highlights of the quarter Pre-sales recovering:

RESULTS REVIEW 1QFY19 12 AUG 2018

DLF BUY

HDFC securities Institutional Research is also available on Bloomberg HSLB <GO>& Thomson Reuters

On track DLF’s prior period figures are not comparable on account of DLF moving from Percentage Completion to Project Completion method of accounting under IND AS 115 from 1QFY19. This led to reversals of Rs 53.8bn from retained earnings (Revenue reversal of ~Rs 140bn, last 5yrs cumulative sales) for its uncompleted projects majorly in DLF 5 (as hand over/ possession letters were delayed even in some completed projects).

NCR market has shown signs of demand recovery starting over the past couple of quarters. DLF recorded Rs 6bn of net pre-sales of which Rs 4.5bn is in DLF Phase V. This is encouraging as form almost 60% of inventory.

We are little surprised with quantum of IND AS-115 sales reversals on projects which are in last stages of completions, DLF attributes it to conservative accounting. Adjusted for land payment of Rs 7.5bn, DLF achieved 1QFY19 cash flow break even. We remain positive on DLF on account of deleveraging. Maintain BUY with NAV of Rs 279/sh.

Highlights of the quarter

Pre-sales recovering: DLF achieved Rs 6bn of pre-sales on Rs 135bn of inventory and maintained Rs 20-22.5bn annual pre-sales. The ready inventory shallget monetized over 5-6yrs. New land capex will bestrategic viz. HSIIDC land which has a developmentpotential of 2.5mn sqft (commercial) and DLF issearching for PE partner to take up 50% stake.

Standalone debt to reduce: DLF’s net debt (ex.DCCDL) is Rs 71.2bn (increase by Rs 7.5bn – , HSIIDC& MRC acquisition) which will further decrease postthe expected QIP (timeline not yet clear) of ~173mnshares and residual promoter inflow of ~Rs 23bn.Existing inventory is majorly completed and DLFexpects positive FCF generation from 2HFY19E.

Rental portfolio to exhibit strong growth: DCCDL willcontinue to add > Rs 10bn to the bottom lineannually. Rent revisions, new additions (eg. CyberPark), fresh developments will drive rental yields forDLF.

Financial Summary* Year Ending March (Rs mn) 1QFY19 1QFY18 YoY (%) 4QFY18 QoQ (%) FY17 FY18 FY19E FY20E Net Sales 15,074 82,212 (81.7) 13,777 9.4 82,212 67,068 80,136 84,657 EBITDA 3,086 34,333 (91.0) (138) (2,329.7) 34,333 23,774 38,113 40,429 APAT 1,728 7,148 (75.8) 517 234.0 5,028 (2,415) 4,081 6,500 Diluted EPS (Rs) 1.0 4.0 (75.8) 0.3 234.0 2.8 (1.4) 2.3 3.7 P/E (x) 69.7 - 86.3 54.2 EV / EBITDA (x) 17.5 26.1 16.6 15.7 RoE (%) 3.0 (1.0) 1.6 2.6 Source : Company, HDFC sec Inst Research, * Consolidated

INDUSTRY REAL ESTATE

CMP (as on 10 Aug 2018) Rs 197

Target Price Rs 279 Nifty 11,430

Sensex 37,869

KEY STOCK DATA Bloomberg DLFU IN

No. of Shares (mn) 1,784

MCap (Rs bn) / ($ mn) 351/5,092

6m avg traded value (Rs mn) 1,279

STOCK PERFORMANCE (%)

52 Week high / low Rs 274/153

3M 6M 12M

Absolute (%) (8.0) (14.2) 19.4

Relative (%) (15.4) (25.6) (0.7)

SHAREHOLDING PATTERN (%)

Promoters 74.95

DIIs & Local MFs 1.63

FPIs 16.69

Public & Others 6.73 Source : BSE

Parikshit D Kandpal [email protected] +91-22-6171-7317

Kunal Bhandari [email protected] +91-22-6639-3035

Page 2: RESULTS REVIEW 1QFY19 12 AUG 2018 DLF · remain positive on DLF on account of deleveraging. Maintain BUY with NAV DLF.of Rs 279/sh. Highlights of the quarter Pre-sales recovering:

DLF : RESULTS REVIEW 1QFY19

Page | 2

Quarterly Financial Snapshot (Consolidated) Particulars 1QFY19 1QFY18 YoY (%) 4QFY18 QoQ (%) Net Sales 15,074 82,212 (81.7) 13,777 9.4 Material Expenses (9,453) (34,658) (72.7) (11,362) (16.8) Employee Expenses (786) (3,283) (76.1) (779) 0.9 Other Operating Expenses (1,749) (9,939) (82.4) (1,774) (1.4) EBITDA 3,086 34,333 (91.0) (138) (2,329.7) Interest Cost (4,975) (29,798) (83.3) (5,169) (3.7) Depreciation (564) (5,725) (90.1) (623) (9.4) Other Income 1,503 11,485 (86.9) 4,683 (67.9) PBT (950) 10,295 (109.2) (1,248) (23.8) Tax 260 (2,293) (111.3) (334) (177.7) Minority Interest 3 68 (95.1) 45 (92.6) Exceptional items - (214) (100.0) 1,960 (100.0) Share of associates 2,415 (923) (361.8) 2,055 17.5 RPAT 1,728 6,934 (75.1) 2,477 (30.3) Exceptional adjustments - 214 (100.0) (1,960) (100.0) APAT 1,728 7,148 (75.8) 517 234.0 Source: Company, HDFC sec Inst Research

Margin Analysis (Consolidated) MARGIN ANALYSIS 1QFY19 1QFY18 YoY (bps) 4QFY18 QoQ (bps) Material Expenses % Net Sales 62.7 42.2 2,055.6 82.5 (1,976.2) Employee Expenses % Net Sales 5.2 4.0 121.8 5.7 (44.2) Other OPEX % Net Sales 11.6 12.1 (48.4) 12.9 (127.3) EBITDA Margin (%) 20.5 41.8 (2,128.9) (1.0) 2,147.7 Tax Rate (%) 27.3 22.3 505.8 (26.8) N.M APAT Margin (%) 11.5 8.7 276.8 3.8 770.7 Source: Company, HDFC sec Inst Research

DLF 1QFY19 revenues came in at Rs 15.0bn (-9.4% QoQ) and is higher by Rs 1.9bn on account of IND AS 115

EBITDA came in at Rs 3.1bn (vs loss of Rs 2.3bn QoQ)

1QFY19 APAT came in at Rs 1.7bn vs Rs 0.5bn for 4QFY18. During previous quarter 4QFY18, the company had recorded exceptional gains of Rs 2.0bn for fair valuation, impairment and merger related adjustments

DCCDL’s share of profit for 1QFY19 has been directly shown as one line item under ‘share of associates’ at effective share of 66.7% and adjusted for same DLF reported PBT loss of Rs 950mn

EBIDTA margin is lower at 20.5% and will be volatile on quarterly basis due to project mix. DLF Phase V contribution will drive margins higher. On blended basis residential margins should be 40-45% over long term

Page 3: RESULTS REVIEW 1QFY19 12 AUG 2018 DLF · remain positive on DLF on account of deleveraging. Maintain BUY with NAV DLF.of Rs 279/sh. Highlights of the quarter Pre-sales recovering:

DLF : RESULTS REVIEW 1QFY19

Page | 3

Key Assumptions And Estimates

Estimates Growth (%) Comments

FY19E FY20E FY19E FY20E Residential (mn sqft) 1.2 1.4 51.2 14.6 Residential volume will grow 51.2% on a reduced FY18 base where sales

were paused till Nov 17 Average rate (Rs/sqft) 25,964 22,405 97.4 (13.7) Sales value (Rs mn) 30,819 30,471 198.4 (1.1) New leasing (mn sqft) 1.1 1.2 22.2 9.1 New addition of 1-1.2mn sqft annually

Rental Income Gross area for lease (mn sqft) 32.3 32.8 1.6 1.5 Average occupancy % 97.7 99.9 2.0 2.2 Leased space (mnsf) 31.6 32.8 3.6 3.8 Occupancy to remain stable Average Rental (Rs/sqft/month) 81.5 82.8 6.4 1.6 Rental income (Rs mn) 30,917 32,609 10.3 5.5 Rental income to portray stable growth

Earnings forecast Residential Sales (Rs mn) 49,219 52,048 15.0 5.7 Rental income (Rs mn) 30,917 32,609 10.3 5.5 Total 80,136 84,657 13.1 5.6 9.3% FY18-20E income CAGR

EBIDTA (Rs mn) 38,113 40,429 20.9 6.1 13.2% CAGR for FY18-20E

EBIDTA Margin (%) 47.6 47.8 304.5 19.6 Margins to improve over FY19-20E as existing inventory has a better margin profile

Net interest expense 32,167 31,584 5.4 (1.8) APAT (Rs mn) 4,081 6,500 351.0 59.3 168.0% CAGR for FY18-20E

APAT Margin (%) 5.1 7.7 381.5 258.6 Source: Company, HDFC sec Inst Research

Residential volume will grow 51.2% on a reduced FY18 base where sales were paused till Nov 17 Realisation to be driven by Gurgaon Phase V projects as company focuses on selling current inventory Rental income will exhibit stable growth, on account of recalibration of existing rentals higher and new lease signups There has been no change in estimates

Page 4: RESULTS REVIEW 1QFY19 12 AUG 2018 DLF · remain positive on DLF on account of deleveraging. Maintain BUY with NAV DLF.of Rs 279/sh. Highlights of the quarter Pre-sales recovering:

DLF : RESULTS REVIEW 1QFY19

Page | 4

Proforma Profit & Loss – Statement – DCCDL JV accounting FY19E FY20E

Residential (mn sqft) 1.2 1.4 Average rate (Rs/sqft) 25,964 22,405 Sales value (Rs mn) 30,819 30,471 Gross area for lease (mn sqft) 6.2 6.5 Average occupancy % 97.7 99.9 Leased space (mnsf) 6.1 6.5 Average Rental (Rs/sqft/month) 81.5 82.8 Rental income (Rs mn) 5,954 6,494 Earnings forecast Residential Sales (Rs mn) 44,297 44,762 Rental income (Rs mn) 5,954 6,494 CAM charges (Rs mn) 2,040 2,081 Total 52,292 53,336 EBIDTA (Rs mn) 19,158 19,793 EBIDTA Margin (%) 36.6 37.1 Net interest expense* 17,850 17,136 Depreciation 2,000 2,000 Other income 6,000 6,000 Profit from JV (DCCDL)# 10,412 11,454 PBT 15,720 18,111 Tax 3,459 3,984 APAT (Rs mn) 12,262 14,126 APAT margin (%) 23.4 26.5 Difference in APAT vs Current estimates 8,181 7,627 Source: Company, HDFC sec Inst Research *includes non cash interest on balances payable to DCCDL # DCCDL to be consolidated as single line item

In accordance with IND AS, due to loss of control in DCCDL, the same will be treated as a JV at the group level instead of line by line consolidation

We have deconsolidated the P&L, and pro-forma profits are substantially higher on account of saving of interest expense owing to deleveraging

We have casted the pro-forma to showcase the earnings rebound. Though this will initiate dilution and hence EPS will be right matrix to look at. We shall incorporate de-leveraging in our number post detailed financials are published in AR

Page 5: RESULTS REVIEW 1QFY19 12 AUG 2018 DLF · remain positive on DLF on account of deleveraging. Maintain BUY with NAV DLF.of Rs 279/sh. Highlights of the quarter Pre-sales recovering:

DLF : RESULTS REVIEW 1QFY19

Page | 5

Valuation: Maintain NAV target - Rs 279/sh

SoTP valuation We have adopted the DCF methodology to arrive at

DLF’s NAV/share. We value the Residential real estate business at Rs 31/share, Commercial annuity assets at Rs 176/share, Others - Hospitality and Project management at Rs 47/share, land bank at Rs 172/share

and reduce net debt at Rs 148/share to arrive at NAV of Rs 279/share for the company.

We continue to await further momentum in the NCR market. Maintain a BUY on DLF with a target price of Rs 279/share.

Sum Of The Parts Rs mn Rs/share Comments Gross NAV Residential 55,858 31 NAV based on the methodology discussed

Gross NAV Commercial 313,273 176 NAV based on the methodology discussed Other business 84,251 47 6-8x FY17E EV/EBIDTA

Land Bank 306,541 172 Removed 10-15% demonit discount

Total Gross NAV 759,923 427

Less: Net Debt* 262,937 148 Net Debt, including DLF’s share of DCCDL’s debt

NAV 496,986 279 NAV discount (%) - Final NAV 279 Source: Company, HDFC sec Inst Research Debt position Particulars (Rs nn) DLF Group (ex DCCDL) DCCDL

Opening Debt as on Jan-18 123.8 165.6

Less: Repayments during 4QFY18 -37.3 -2.0

Add: New borrowings/ IND AS adjustments 8.5 5.7

Less: Cash in hand -32.3 -6.7

Net debt position 62.7* 162.6 *Excludes Rs 83.0bn payable by DLF to DCCDL. The same will be settled via sale of certain yielding assets and land parcels earmarked for commercial use.

We value the Residential real estate business at Rs 31/share. Commercial annuity assets stand at Rs 176/share, other business at Rs 47/share Land bank at Rs 172/share Adding all these, we arrive at gross NAV of Rs 427/sh We reduce net debt to Rs 148/share to arrive at NAV of Rs 279/share for DLF DLF (ex DCCDL) is expected to turn net debt zero post fresh capital infusion

Page 6: RESULTS REVIEW 1QFY19 12 AUG 2018 DLF · remain positive on DLF on account of deleveraging. Maintain BUY with NAV DLF.of Rs 279/sh. Highlights of the quarter Pre-sales recovering:

DLF : RESULTS REVIEW 1QFY19

Page | 6

Real estate development: NAV calculation methodology We have divided DLF’s entire land bank into residential

projects (based on the information given by the company)

We have arrived at the sale price/sq ft. and the anticipated sales volumes for each project based on our discussions with industry experts

We have deducted the cost of construction based on our assumed cost estimates, which have been arrived at after discussions with industry experts

We have further deducted marketing and other costs which have been assumed at 5% of the sales revenue

We have then deducted income tax based on the tax applicable for the project

The resultant cash inflows at the project level have been discounted, based on WACC of 14.1% (cost of equity 16.8% based on beta of 1.4x & debt/equity ratio of 0.9x). All the project level NAVs have then been summed up to arrive at the NAV of the company

For commercial office/retail space, we have discounted rentals using 14.1% WACC for the forecasted period and terminal value using the cap rate of 10%

From the NAV, we have deducted the current net debt to arrive at the final valuation of the company.

Base Case Assumptions Discount rate 14.1%

Annual rate of inflation-sales price 5%

Annual rate of inflation-cost of construction 6% Other costs – marketing, SGA, employee cost (as % of sales) 5%

Tax rate (%) 33%

In the exhibit below, we highlight our sales price and construction cost forecasts. Our pricing assumptions are moderate, and at a 0-10% discount to the current prevailing prices.

Base Property Price And Construction Cost Assumptions

Location Prices Cost

Rs/sq ft Rs/sq ft

Gurgaon 6,750-19,000 2,000-4,500

Bengaluru 4,500-7,500 2,000-2,500

Delhi Metropolitan Area 9,000-22,500 4,00 -5,500

Chennai 4,050-6,750 2,000-2,500

Hyderabad 4,500-5,500 2,000-2,200

Chandigarh 4,500-5,500 2,000-2,200

Kolkatta 4,500-5,500 2,000-2,200

Others 3,500-5,500 2,000-2,200 Source: Company, HDFC sec Inst Research

We have used WACC assumption of 14.1% for valuing DLF’s Residential business In commercial office/retail space, we have discounted rentals using 14.1% WACC for the forecasted period and terminal value using the cap rate of 9% We have valued services/maintenance and other business at 6-8x FY19E EV/EBIDTA

Page 7: RESULTS REVIEW 1QFY19 12 AUG 2018 DLF · remain positive on DLF on account of deleveraging. Maintain BUY with NAV DLF.of Rs 279/sh. Highlights of the quarter Pre-sales recovering:

DLF : RESULTS REVIEW 1QFY19

Page | 7

NAV sensitivity analysis Sensitivity to our assumption of property prices

Our model is sensitive to changes in the assumptionsregarding property prices. For every 1% change in thebase property prices, the NAV will change byapproximately 1.9%.

NAV Sensitivity To Change In Average Sales Price % change in sale price -10 -5 0 5 10

NAV/share (Rs) 224 251 279 306 332 Change in NAV (%) (19.6) (9.8) - 9.5 18.8 Source: Company, HDFC sec Inst Research

Sensitivity of NAV to changes in sales inflation

In our base case, we have assumed an annual sale priceinflation of 5%. For every 100bps increase in theannual sale price inflation, the NAV will increase byapproximately 6.2%.

NAV Sensitivity To Change In Sales Inflation Sales inflation rates (%) 3 4 5 6 7

NAV/share (Rs) 247 262 279 297 314 Change in NAV (%) (11.5) (6.1) - 6.2 12.3 Source: Company, HDFC sec Inst Research

Sensitivity of NAV to changes in cost inflation

In our base case, we have assumed cost inflation at 6%.For every 100bps increase in construction costinflation, the NAV will change by approximately 4.6%.

NAV Sensitivity To Change In Cost Inflation Cost inflation rates (%) 4 5 6 7 8

NAV/share (Rs) 304 292 279 267 253 Change in NAV (%) 8.9 4.5 - (4.6) (9.4) Source: Company, HDFC sec Inst Research

The combined impact of a 100bps increase in sales price inflation and cost inflation will be an increase in NAV of 1.6%.

Sensitivity of NAV to changes in discount rate

In our base case, we have assumed a discount rate of14.1%. For every 100bps increase in the discount rate,the NAV will fall by 3.7%.

NAV Sensitivity To Change In WACC WACC rates (%) 12 13 14 15 16 NAV/share (Rs) 299 289 279 269 260 Change in NAV (%) 7.1 3.5 - (3.7) (6.8) Source: Company, HDFC sec Inst Research

1% increase in average base sale price impacts our NAV positively by 1.9%

Every 100bps increase in sale price inflation impacts our NAV positively by 6.2%

100bps increase in cost inputs decreases our NAV by 4.6%

100bps increase in discounting rate impacts our NAV negatively by 3.7%

Page 8: RESULTS REVIEW 1QFY19 12 AUG 2018 DLF · remain positive on DLF on account of deleveraging. Maintain BUY with NAV DLF.of Rs 279/sh. Highlights of the quarter Pre-sales recovering:

DLF : RESULTS REVIEW 1QFY19

Page | 8

Income Statement: Consolidated Y/E March (Rs mn) FY16 FY17 FY18 FY19E FY20E Net Sales 99,256 82,212 67,068 80,136 84,657 Growth (%) 29.8 (17.2) (18.4) 13.1 5.6 Material Expenses 45,579 34,658 31,153 29,983 31,282 Employee Expenses 3,152 3,283 3,436 3,390 3,430 Other Operating Expenses 10,553 9,938 8,704 8,650 9,515 EBIDTA 39,972 34,333 23,774 38,113 40,429 EBIDTA (%) 40.3 41.8 35.4 47.6 47.8 EBIDTA Growth (%) 32.2 (14.1) (30.8) 20.9 6.1 Other Income 6,714 7,193 9,569 6,640 6,720 Depreciation 7,659 5,725 5,335 6,589 6,737 EBIT 39,027 35,801 28,008 38,164 40,412 Interest 26,798 29,798 29,507 32,167 31,584 Exceptional items 1,967 (4,293) 47,053 - - PBT 10,263 10,295 45,555 5,997 8,828 Tax 5,642 2,293 2,631 1,319 1,942 Minority Interest (11) (68) 129 45 35 Share of associates loss/(profit) 1,569 923 1,844 552 351 RPAT 3,062 7,148 44,639 4,081 6,500 EO items (net of tax) 1,688 2,120 (47,053) 0 0 APAT 1,374 5,028 (2,415) 4,081 6,500 APAT Growth (%) (75.7) 266.1 (148.0) 351.0 59.3 EPS 0.8 2.8 (1.4) 2.3 3.7 EPS Growth (%) (75.7) 266.1 (148.0) 351.0 59.3 Source: Company, HDFC sec Inst Research

Balance Sheet: Consolidated Y/E March (Rs mn) FY16 FY17 FY18 FY19E FY20E SOURCES OF FUNDS Share Capital 3,567 3,568 3,568 3,568 3,568 Reserves 237,123 242,160 242,569 244,300 250,101 Total Shareholders Funds 240,691 245,728 246,137 247,868 253,669 Minority Interest 1,261 1,239 1,199 1,154 1,119 Long Term Debt 203,285 232,554 247,554 242,554 237,554 Short Term Debt 26,936 34,080 34,080 34,080 34,080 Current Maturities 22,412 25,389 27,027 26,481 25,935 Total Debt 252,633 292,023 308,661 303,115 297,569 Deferred Taxes (41,792) (43,581) (43,581) (43,581) (43,581) Long Term Provisions & Others 23,362 24,654 24,654 24,654 24,654 TOTAL SOURCES OF FUNDS 476,156 520,063 537,070 533,209 533,430 APPLICATION OF FUNDS Net Block 29,253 26,660 26,406 25,317 24,081 CWIP 17,791 19,418 19,018 18,518 18,018 Goodwill 10,110 10,110 10,110 10,110 10,110 Investment Property 193,064 191,742 209,248 222,075 240,129 Investments, LT Loans & Advances 19,292 11,575 11,575 11,575 11,575 Other Non Current Assets 43,816 40,330 40,379 40,427 40,476 Inventories 168,342 199,491 202,962 205,364 197,121 Debtors 34,169 36,416 36,878 41,715 44,068 Cash & Equivalents 33,813 40,992 39,575 21,863 16,918 ST Loans & Advances, Others 25,782 22,667 22,295 23,232 28,541 Total Current Assets 262,107 299,566 301,710 292,174 286,648 Creditors 15,142 17,175 18,034 18,935 19,882 Other Current Liabilities & Provns 84,135 62,163 63,342 68,051 77,725 Total Current Liabilities 99,277 79,338 81,376 86,986 97,607 Net Current Assets 162,830 220,228 220,334 205,187 189,041 Misc Expenses & Others - - - - - TOTAL APPLICATION OF FUNDS 476,156 520,063 537,070 533,209 533,430 Source: Company, HDFC sec Inst Research

Page 9: RESULTS REVIEW 1QFY19 12 AUG 2018 DLF · remain positive on DLF on account of deleveraging. Maintain BUY with NAV DLF.of Rs 279/sh. Highlights of the quarter Pre-sales recovering:

DLF : RESULTS REVIEW 1QFY19

Page | 9

Cash Flow: Consolidated Y/E March (Rs mn) FY16 FY17 FY18 FY19E FY20E

PBT before minority 12,229 6,003 1,815 5,997 8,828

Non-operating & EO items (8,052) (2,010) (7,032) (7,192) (7,071)

Taxes (6,484) (3,278) (399) (1,319) (1,942)

Interest expenses 26,798 29,798 30,528 32,167 31,584

Depreciation 7,659 5,725 5,754 6,589 6,737

Working Capital Change (2,581) (45,217) (1,572) (2,614) 11,153

OPERATING CASH FLOW ( a ) 29,569 (8,979) 29,094 33,627 49,288

Capex (5,858) (2,032) (5,100) (5,000) (5,000)

Free cash flow (FCF) 23,711 (11,011) 23,994 28,627 44,288

Investments (2,323) 10,748 (10,945) (6,187) (11,335)

INVESTING CASH FLOW ( b ) (8,180) 8,716 (16,045) (11,187) (16,335)

Share capital Issuance 4 1 - - -

Debt Issuance 20,654 39,384 16,638 (5,546) (5,546)

Interest expenses (32,087) (31,474) (30,528) (32,167) (31,584)

Dividend (7,856) (39) (576) (2,440) (769)

FINANCING CASH FLOW ( c ) (19,285) 7,871 (14,466) (40,153) (37,899)

NET CASH FLOW (a+b+c) 2,103 7,608 (1,417) (17,712) (4,945)

Closing Cash & Equivalents 33,813 40,992 39,575 21,863 16,918 Source: Company, HDFC sec Inst Research, Financials as per percentage completion as we await more details on IND AS 115 adjustment across DLF and DCCDL to make changes in balance sheet. We have given proforma AS-115 impact by recasting P&L for DLF and consolidating DCCDL as Profit/Loss from Associate

Key Ratios: Consolidated FY16 FY17 FY18 FY19E FY20E

GPM 54.1 57.8 53.5 62.6 63.0 EBITDA Margin 40.3 41.8 35.4 47.6 47.8 APAT Margin 1.4 6.1 (3.6) 5.1 7.7 RoE 0.5 2.1 (1.0) 1.7 2.6 Core RoCE 8.0 7.4 5.4 7.3 7.7 RoCE 8.0 7.4 5.4 7.3 7.7 EFFICIENCY Tax Rate (%) 55.0 22.3 5.8 22.0 22.0 Asset Turnover (x) 0.2 0.2 0.1 0.2 0.2 Inventory (days) 633 817 1,095 930 868 Debtors (days) 92 157 199 179 185 Payables (days) 28 72 96 84 84 Cash Conversion Cycle (days) 697 901 1,199 1,025 969 Debt/EBITDA (x) 6.3 8.5 13.0 8.0 7.4 Net D/E 0.9 1.0 1.1 1.1 1.1 Interest Coverage 1.5 1.2 0.9 1.2 1.3 PER SHARE DATA EPS (Rs/sh) 0.8 2.8 - 1.4 2.3 3.7 CEPS (Rs/sh) 5.1 6.0 1.6 6.0 7.4 DPS (Rs/sh) 4.4 0.0 1.0 1.0 1.0 BV (Rs/sh) 135.3 138.2 138.4 139.4 142.6 VALUATION P/E 256.4 70.0 - 86.3 54.2 P/BV 1.5 1.4 1.4 1.4 1.4 EV/EBITDA 14.3 17.6 26.1 16.6 15.7 OCF/EV (%) 0.1 (0.0) 0.0 0.1 0.1 FCF/EV (%) 4.2 (1.8) 3.9 4.5 7.0 FCFE/Market Cap (%) 3.5 (0.9) 2.9 (2.6) 2.0 Dividend Yield (%) 2.2 0.0 0.5 0.5 0.5 GPM 54.1 57.8 53.5 62.6 63.0 Source: Company, HDFC sec Inst Research

Page 10: RESULTS REVIEW 1QFY19 12 AUG 2018 DLF · remain positive on DLF on account of deleveraging. Maintain BUY with NAV DLF.of Rs 279/sh. Highlights of the quarter Pre-sales recovering:

DLF : RESULTS REVIEW 1QFY19

Page | 10

Rating Definitions BUY : Where the stock is expected to deliver more than 10% returns over the next 12 month period NEUTRAL : Where the stock is expected to deliver (-)10% to 10% returns over the next 12 month period SELL : Where the stock is expected to deliver less than (-)10% returns over the next 12 month period

Date CMP Reco Target 29-Aug-17 180 NEU 202 11-Oct-17 170 BUY 202 13-Nov-17 208 BUY 236 12-Jan-18 268 NEU 280 17-Feb-18 225 BUY 279 16-Apr-18 215 BUY 279 23-May-18 198 BUY 279 12-Aug-18 197 BUY 279

70

120

170

220

270

Aug-

17

Sep-

17

Oct

-17

Nov-

17

Dec-

17

Jan-

18

Feb-

18

Mar

-18

Apr-

18

May

-18

Jun-

18

Jul-1

8

Aug-

18

DLF TP

RECOMMENDATION HISTORY

Page 11: RESULTS REVIEW 1QFY19 12 AUG 2018 DLF · remain positive on DLF on account of deleveraging. Maintain BUY with NAV DLF.of Rs 279/sh. Highlights of the quarter Pre-sales recovering:

DLF : RESULTS REVIEW 1QFY19

Page | 11

Disclosure: We, Parikshit Kandpal, MBA & Kunal Bhandari, ACA, authors and the names subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect our views about the subject issuer(s) or securities. HSL has no material adverse disciplinary history as on the date of publication of this report. We also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report. Research Analyst or his/her relative or HDFC Securities Ltd. does not have any financial interest in the subject company. Also Research Analyst or his relative or HDFC Securities Ltd. or its Associate may have beneficial ownership of 1% or more in the subject company at the end of the month immediately preceding the date of publication of the Research Report. Further Research Analyst or his relative or HDFC Securities Ltd. or its associate does not have any material conflict of interest. Any holding in stock –No HDFC Securities Limited (HSL) is a SEBI Registered Research Analyst having registration no. INH000002475. Disclaimer: This report has been prepared by HDFC Securities Ltd and is meant for sole use by the recipient and not for circulation. The information and opinions contained herein have been compiled or arrived at, based upon information obtained in good faith from sources believed to be reliable. Such information has not been independently verified and no guaranty, representation of warranty, express or implied, is made as to its accuracy, completeness or correctness. All such information and opinions are subject to change without notice. This document is for information purposes only. Descriptions of any company or companies or their securities mentioned herein are not intended to be complete and this document is not, and should not be construed as an offer or solicitation of an offer, to buy or sell any securities or other financial instruments. This report is not directed to, or intended for display, downloading, printing, reproducing or for distribution to or use by, any person or entity who is a citizen or resident or located in any locality, state, country or other jurisdiction where such distribution, publication, reproduction, availability or use would be contrary to law or regulation or what would subject HSL or its affiliates to any registration or licensing requirement within such jurisdiction. If this report is inadvertently send or has reached any individual in such country, especially, USA, the same may be ignored and brought to the attention of the sender. This document may not be reproduced, distributed or published for any purposes without prior written approval of HSL. Foreign currencies denominated securities, wherever mentioned, are subject to exchange rate fluctuations, which could have an adverse effect on their value or price, or the income derived from them. In addition, investors in securities such as ADRs, the values of which are influenced by foreign currencies effectively assume currency risk. It should not be considered to be taken as an offer to sell or a solicitation to buy any security. HSL may from time to time solicit from, or perform broking, or other services for, any company mentioned in this mail and/or its attachments. HSL and its affiliated company(ies), their directors and employees may; (a) from time to time, have a long or short position in, and buy or sell the securities of the company(ies) mentioned herein or (b) be engaged in any other transaction involving such securities and earn brokerage or other compensation or act as a market maker in the financial instruments of the company(ies) discussed herein or act as an advisor or lender/borrower to such company(ies) or may have any other potential conflict of interests with respect to any recommendation and other related information and opinions. HSL, its directors, analysts or employees do not take any responsibility, financial or otherwise, of the losses or the damages sustained due to the investments made or any action taken on basis of this report, including but not restricted to, fluctuation in the prices of shares and bonds, changes in the currency rates, diminution in the NAVs, reduction in the dividend or income, etc. HSL and other group companies, its directors, associates, employees may have various positions in any of the stocks, securities and financial instruments dealt in the report, or may make sell or purchase or other deals in these securities from time to time or may deal in other securities of the companies / organizations described in this report. HSL or its associates might have managed or co-managed public offering of securities for the subject company or might have been mandated by the subject company for any other assignment in the past twelve months. HSL or its associates might have received any compensation from the companies mentioned in the report during the period preceding twelve months from t date of this report for services in respect of managing or co-managing public offerings, corporate finance, investment banking or merchant banking, brokerage services or other advisory service in a merger or specific transaction in the normal course of business. HSL or its analysts did not receive any compensation or other benefits from the companies mentioned in the report or third party in connection with preparation of the research report. Accordingly, neither HSL nor Research Analysts have any material conflict of interest at the time of publication of this report. Compensation of our Research Analysts is not based on any specific merchant banking, investment banking or brokerage service transactions. HSL may have issued other reports that are inconsistent with and reach different conclusion from the information presented in this report. Research entity has not been engaged in market making activity for the subject company. Research analyst has not served as an officer, director or employee of the subject company. We have not received any compensation/benefits from the subject company or third party in connection with the Research Report. HDFC securities Limited, I Think Techno Campus, Building - B, "Alpha", Office Floor 8, Near Kanjurmarg Station, Opp. Crompton Greaves, Kanjurmarg (East), Mumbai 400 042 Phone: (022) 3075 3400 Fax: (022) 2496 5066 Compliance Officer: Binkle R. Oza Email: [email protected] Phone: (022) 3045 3600 HDFC Securities Limited, SEBI Reg. No.: NSE-INB/F/E 231109431, BSE-INB/F 011109437, AMFI Reg. No. ARN: 13549, PFRDA Reg. No. POP: 04102015, IRDA Corporate Agent License No.: HDF 2806925/HDF C000222657, SEBI Research Analyst Reg. No.: INH000002475, CIN - U67120MH2000PLC152193 Mutual Funds Investments are subject to market risk. Please read the offer and scheme related documents carefully before investing.

Page 12: RESULTS REVIEW 1QFY19 12 AUG 2018 DLF · remain positive on DLF on account of deleveraging. Maintain BUY with NAV DLF.of Rs 279/sh. Highlights of the quarter Pre-sales recovering:

DLF : RESULTS REVIEW 1QFY19

Page | 12

HDFC securities Institutional Equities Unit No. 1602, 16th Floor, Tower A, Peninsula Business Park, Senapati Bapat Marg, Lower Parel, Mumbai - 400 013 Board : +91-22-6171 7330www.hdfcsec.com